Inflation Set to Rise in US - Which May Push Up Rates

Falling food and hard-goods prices have kept a lid on inflation across the pond - but not for much longer, which will put pressure on interest rates

Robert Johnson, CFA 18 July, 2016 | 2:22PM

Last week was another decent week for equity markets as headline U.S. economic data suggested a sharply improving economy. While a more careful look at the data was not as bullish, fears of a U.S. recession seem greatly diminished.

Central bankers continued to suggest that more easing was likely in the months ahead and that soft export data out of China could mean more stimulus in that market. That tends to handcuff the U.S. Federal Reserve from raising rates, even as the U.S. economy accelerates and inflation worsens.

Academic economists often study past Fed actions surrounding bouts of inflation and conclude that the Fed was asleep at the interest-rate switch, or at least too slow to act. They ask how this can happen again and again.

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About Author

Robert Johnson, CFA  is director of economic analysis with Morningstar.

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